Graduate starting salaries drop to lowest levels since 2003, finds IDS
David Woods, April 19, 2012
Starting salaries for graduates are projected to decline in real terms this year, falling to the lowest levels since 2003, according to a report into graduate pay and progression by Incomes Data Services (IDS).
It's report revealed 90% of businesses are freezing salaries for new graduates this year but the number of graduate jobs set to increase 9.1% in 2012.
IDS found there were 46 applicants for every graduate vacancy in 2011, up 12% from 41 in 2010.
According to IDS, the median starting salary for graduates will be £25,000 this year, unchanged from 2011. When adjusted to account for inflation, this reveals a 2% pay cut from £19,020 in 2011 to £18,705 in 2012.
Nasreen Rahman, principal researcher of IDS's Pay and progression for graduates 2012, said: "It remains a buyers' market for graduate recruiters this year, with starting salaries set to stagnate for a further year.
"High rates of price inflation over the last few years have been eating away at the purchasing power of starting salaries for new graduates.
"Even though the demand for graduate recruits is showing signs of revival, the competition for places means that employers are under little pressure to increase current rates despite high inflation.
According to IDS, legal firms are projected to pay graduates the highest starting salaries this year, with pay of £36,000 at the median, which remains unchanged from 2011. In contrast, the lowest starting salaries in 2011 were paid by the public/not-for-profit sector (£22,958).
Starting salaries for roles in banking and finance are also projected to remain unchanged this year, at £31,250, while starting salaries in professional services remain at £24,750.
According to IDS, the services sector is planning to boost graduate numbers by 38% in the coming year, while the public/not-for-profit sector expects to increase intake by 6.7%, a turnaround from the 5% reduction last year.
Rahman added: "Demand for graduates is expected to be relatively buoyant in 2012, but this is unlikely to impact pay levels."
"With economic sentiment picking up, employers are starting to expand their graduate programmes further, with some employers now re-opening schemes that had been put on ice during the downturn."
"However with so many graduates competing for positions it is clear employers see little need to boost starting salaries."
IDS surveyed 109 employers who recruited to specific graduate entry training programmes.